Hiap Teck gears for new markets

By Sharen Kaur
The main board firm is talking to a few parties in Europe to sell oil and gas pipes as well as structural pipes to the UK, Germany and Belgium.

HIAP Teck Venture Bhd, which makes steel pipes, plans to utilise its production capacity to the fullest by moving towards new markets, such as the US and Europe, and targeting the oil and gas industry.It wants to increase its profit base and is planning its first shipment to the US in May, executive director Law Sook Teng said.The main board firm with a market capitalisation of RM600 million is also talking to a few parties in Europe to sell oil and gas and structural pipes to the UK, Germany and Belgium in the second half-year."We have excess capacity and it is about marketing and selling that. We are moving into the US, which is a relatively new market for us. Our next target is Europe," Law told Business Times in an interview.

Hiap Teck is the largest electric resistant welding (ERW) pipe-maker and exporter in the Asean region.Its annual capacity from nine production lines in Meru, Klang, is 580,000 tonnes. Out of that, 300,000 tonnes will go towards making big-diameter (six to 18 inches) oil and gas, water, and infrastructure pipes.Currently, only 35 per cent capacity is being utilised to make gas and infrastructure pipes. The company wants to increase this to 60 per cent by the next financial year by selling more oil and gas pipes.The remaining 280,000 tonnes, of which about 80 per cent is being utilised, are for making optimum and mid-range pipes (two to six inches).

Hiap Teck is targeting double-digit growth in revenue and net profit for its fiscal years ending July 31 2008 and 2009, driven by capacity increase and utilisation, Law said.It made net profit of RM71.4 million on revenue of RM1.28 billion in the fiscal year ended July 31 2007.Law expects new markets and higher-grade pipes to contribute towards better earnings."We had shipments for commodity pipes to the US two years ago, but stopped because of competition from China. Now, we are shipping high-grade oil and gas pipes," she said.The company expects the US and Europe to be its next biggest markets, after Australia and Singapore which are currently contributing up to 35 per cent each to revenue.Law also said that Hiap Teck's new market, Indonesia, is poised be its fifth biggest, contributing around 15 per cent of revenue in one to two years.

Hiap Teck is bullish that the oil and gas, water, manufacturing, and infrastructure industries will remain significant contributors to its bottom line.

Kencana- Quek now 2nd largest shareholder

It was reported that Quek Leng Chan has emerged as a substantial shareholder- after bought additional 5.1% from the market. Before this, he hold 4.8%.

Trading range between 1.40-1.60.

Kencana to up marine-based contribution to 20pc

KENCANA Petroleum Bhd, an integrated solutions and services provider for the petroleum industry, aims to increase contribution from its marine-based business to 20 per cent by 2011.

Its executive chairman Datuk Mokhzani Mahathir said he is confident of increased demand for the group's products."We have proved that we can produce technological structures that are cost-effective. "People are more aware of such facilities here," he told reporters after the Maari sail-away ceremony in Lumut yesterday.

Maari is the world's largest and tallest wellhead platform structure ever built by Kencana HL, a subsidiary of Kencana Petroleum. The technology is from Norway while the project owner is from Australia.The Maari wellhead platform was fabricated in Kencana HL's fabrication yard in Lumut and it will operate out of New Zealand by September this year.

Mokhzani said there are only two similar structures in the world, and Maari that stands at 150m is the taller of the two. Weighing 10,000 tonnes, the Maari is also the tallest offshore structure to be built vertically, in Malaysia."It is self-elevated, relocatable and cost-effective," he added.While the overall cost of the Maari development - including construction of a floating, production, storage and offload vessel - amounts to US$450 million (RM1.4 billion), Kencana Petroleum was given 10 per cent of the jobs, worth about US$45 million (RM143 million)."We are also eager to start our second project on such wellhead structure soon," he said, adding that the Maari platform is expected to reach its final destination within two weeks.

He said Kencana Petroleum has also secured drilling and fabrication of drilling rig licences from Petronas, boosting the group's marine-based business.Mokhzani said Kencana Petroleum had launched the first steel-cutting to mark the construction of its first drilling rig, the Kencana Mermaid-1, last month."We expect the rig to start servicing by the end of next year," he said.

Kencana (RM1.30) - still good bet for upstream O&G

Good:

1- Oil hit USD110/brl

2- Higher dd for oil rigs

3- Australian contracts i.e to Cameron Ltd- BHP Pyrenees Project

Not so good:

1- Project delays

2- Deteriorating orderbook

3- Outsourcing of installation - execution risk

Trading range from RM1.30-1.41.